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ROI Analysis

of
WiFi Offloading

© 2012 Wireless 20/20, LLC. – All rights reserved


2
…the bad news is…

To offload or not to offload…


 Operators of mobile cellular data networks (3G and
4G) face an uphill battle against increasing data
usage and declining ARPUs
 ROI on macro network expansions scrutinized by
shareholders
 iPhones, iPads, Android smartphones, netbooks are all
tapping the mobile network for access anywhere,
anytime
 Majority of access occurs when the user is stationary in
high traffic density areas (home, office, coffee shop
etc.)

© 2012 Wireless 20/20, LLC. – All rights reserved


…the good news is WiFi offload
3 already occurs naturally…

Comscore found that Phil Marshall head of “When you have WiFi,
more than one third Tolaga Research. you do more, and that
(37.2 percent) of U.S. estimates that about effect is pretty hard to
digital traffic coming 20 percent of iPhone measure," Steve
from mobile phones traffic on AT&T Glapa, Rukus. "But
occurred via a WiFi Mobility's network is nonetheless, I would
connection. landing on the public say network traffic on
WiFi network, and it's PCCW's network
by Karl Bode Thursday 27- Oct 2011 likely that another 60 would be 20 percent
percent is landing on higher than if it didn't
home WiFi networks have WiFi. In some of
now that the operator the dense traffic areas
has instituted tiered of Hong Kong, some
data plans, he said. 80 percent of data
traffic is traveling over
WiFi”, he said

© 2012 Wireless 20/20, LLC. – All rights reserved


…a fair assumption according to
4 Light Reading would be…

65% of mobile data traffic already offloaded


 Users are in Wi-Fi coverage 63 percent of the time during the
day/
 65 percent of traffic can be offloaded to Wi-Fi under typical
usage conditions using on-the-spot offload
 Greater offload performance can be achieved if the user is
prepared to accept delayed offload (e.g., sync your videos
or photos when you get home)
 This means that out of the 7GB usage per month, 4.5GB would travel by
Wi-Fi and 2.5GB by cellular. Therefore a 2GB-3GB per month
cellular data plan is probably enough for most users.
Observation: A cellular service provider already benefits from WiFi Offload
without making any investment in deploying a WiFi Network of its own.

© 2012 Wireless 20/20, LLC. – All rights reserved


…in-depth analysis required to
5 make informed decision…

How do we quantify the offload dilemma?


 How do we analyze the impact of a 3G/4G
Service Provider’s Own WiFi Offload Deployment
on its overall Business Case?
 Does it make economic sense to deploy a WiFi
Offload Network?
 What is the Business Case for MNO WiFi Offload?
 What is the ROI of an MNO WiFi Offload?

Answer: Develop a WiROI™ Model to answer these questions

© 2012 Wireless 20/20, LLC. – All rights reserved


6
…the wireless 20|20 process…

Using a holistic approach


 Study the Impact of WiFi Offload on an Urban LTE Deployment
 Deploy an LTE network for Coverage
 Deploy a WiFi Network for Capacity
 Surgically place the WiFi AP’s in high traffic areas
 Calculate the TCO (CapEx and OpEx) for the WiFi Offload Network
 Compare to the TCO of providing Capacity by deploying LTE Cells
for Capacity
 Understand the key deployment parameters which lead to positive
economic impact of WiFi off load
 Calculate and Compare ROI metrics such as NPV, IRR

© 2012 Wireless 20/20, LLC. – All rights reserved


7
…WiROI™ capabilities…

Real time simulation and analysis


 Allow the simulation of public wifi offload to vary the % of the natural
offload
 Allow the simulation model to vary the % of the Urban Area covered by
WiFi
 Allow the simulation model to vary the Density of WiFi AP’s per sq km
 Vary WiFi Vendor Equipment Performance and Price (Cell Radius of
AP’s, cost of AP’s)
 Vary the WiFi Backhaul Cost
 Vary the operating cost of the WiFi network
 Vary the total data capacity a user consumes on a monthly basis

Objective: Discover under what conditions WiFi Offload pays off

© 2012 Wireless 20/20, LLC. – All rights reserved


8
…CAPEX and OPEX drivers…

Major Assumptions
 One Time Costs (CapEx)
 Cost of WiFi Access Point
 Cost of WiFi AP installation
 Cost of Backhaul Equipment
 Cost of Backhaul Equipment Installation and provisioning
 WiFi Core Network Equipment (Servers, Portals, etc.)
 Recurring Costs (OpEx)
 Monthly WiFi and Backhaul Site Rental
 Monthly WiFi and Backhaul Maintenance
 Monthly Traffic Backhaul Cost

Objective: Discover under what conditions WiFi Offload pays off

© 2012 Wireless 20/20, LLC. – All rights reserved


…customized analysis of traffic
9 density…

Cover Areas of High Traffic Density

© 2012 Wireless 20/20, LLC. – All rights reserved


10
…and WiFi AP Density…

More AP’s per Sq Km provide better offload

© 2012 Wireless 20/20, LLC. – All rights reserved


11
…coverage vs. traffic offload…

Coverage vs. Traffic Offload


Traffic
 Hotspot coverage of
high traffic density
120%

100%
areas versus
80% contiguous
60% coverage yields
40% better offload
20%
percentage
 Customized formulas
Coverage
0%

for different market


T=C^(1/2) T=(1-C)^1/2-1 T=C^(1/3) conditions

© 2012 Wireless 20/20, LLC. – All rights reserved


12

WiROI™ Research Analysis


Case Study 1 – LTE Deployment on New York City

© 2012 Wireless 20/20, LLC. – All rights reserved


13
…large dense urban city…

Baseline: New York City


NYC  Assumption: LTE
8 million POPS deployment in NYC
LTE using 1800Mhz  Activity: Simulate TCO
10Mhz Channel impact of implementing
Coverage 789 sq km MNO WiFi Offload
Network
2,194,000 subscribers
 Identify: The scenario for
216 Coverage Sites
optimal financial return
1,879 Capacity Sites
 Analyze: Understand
Cumulative CAPEX $514M
main drivers of the
Cumulative OPEX $3,006M results
TCO $3,520M

© 2012 Wireless 20/20, LLC. – All rights reserved


14
…WiFi vs. LTE assumptions…

Assumptions: CapEx & OpEx


CapEx Assumptions WiFi AP LTE Macro Cell
Cost of 3-Sector BTS $45,000
Cost of WiFi Access Point $500
New Site Acquisition $600 $150,000
Collocation $50,000
Backhaul $300 $5,000
OpEx Assumptions WiFi AP LTE Macro Cell
Monthly Site Rental $20 $1,000
Site Maintenance $10 $200
/month

© 2012 Wireless 20/20, LLC. – All rights reserved


15
…WiFi offload results…

Analysis: TCO impact of WiFi Offload


Manhattan – WiFi Access
 TCO savings of about $123m Points per sq km
$3,550
already with only 20% coverage
and density of 24 AP’s per sq km. $3,500
TCO Savings $123m
$3,450
 Optimal TCO savings of $253m is Optimal Commercial Proposition?
$3,400
achieved with 100% coverage
$3,350
and 42 AP’s per sq km. TCO Savings $253m
$3,300
 The number of macro LTE
$3,250
capacity sites reduced by 1,447 0% 20% 40% 60% 80% 100% 120%
LTE TCO Baseline 24 AP's
and replaced by 33,138 WiFi
42 AP's 60 AP's
access points.
78 AP's 96 AP's

120 AP's

Observation: Optimal Financial Return might not be Optimal Commercial Proposition

© 2012 Wireless 20/20, LLC. – All rights reserved


16
…New York results…

Analysis: Optimal TCO Results

LTE Only WiFi Offload Delta % / $


Total CapEx $514m $284m 44.7% / $230m
Total OpEx $3,006m $2,983m 0.90% / $23m
TCO $3,520m $3,267m 7.20% / $253m
LTE Only WiFi Offload Delta % / $
Cumulative Free
$6,680 $6,967 4.3% / $287m
Cash Flow

© 2012 Wireless 20/20, LLC. – All rights reserved


17

WiROI™ Research Analysis


Case Study 2 – LTE Deployment in San Diego, USA

© 2012 Wireless 20/20, LLC. – All rights reserved


18
…midsize urban city…

Baseline: San Diego


San Diego  Assumption: LTE
1.07 million POPS deployment in San
LTE using 1800Mhz Diego
10Mhz Channel  Activity: Simulate TCO
Coverage 250 sq km impact of implementing
MNO WiFi Offload
206,330 subscribers
Network
69 Coverage Sites
 Identify: The scenario for
206 Capacity Sites
optimal financial return
Cumulative CapEx $69M
 Analyze: Understand
Cumulative OpEx $396M main drivers of the
TCO $465M results
© 2012 Wireless 20/20, LLC. – All rights reserved
19
…WiFi offload results…

Analysis: TCO impact of WiFi Offload


San Diego - WiFi Access
 TCO savings of about $10m
Points per sq km
already with only 20%
$530
coverage and density of 24 $520 TCO Savings $16m
AP’s per sq km. $510
$500 TCO Savings $10m
 Optimal TCO savings of $16m is $490
$480
achieved with 40% coverage $470
coverage and 24 AP’s per sq $460
$450
km. 0% 20% 40% 60% 80% 100% 120%

 At 40% the number of macro LTE LTE TCO Baseline 24 AP's

capacity sites reduced by 100 42 AP's 60 AP's

and replaced by 2,400 WiFi 78 AP's 96 AP's


120 AP's
access points.

Observation: Beyond 80% coverage you start to see diminishing returns

© 2012 Wireless 20/20, LLC. – All rights reserved


20
…San Diego results…

Analysis: Optimal TCO Results

LTE Only WiFi Offload Delta % / $


Total CapEx $69m $55m 20.3% / $14m
Total OpEx $396m $394m 0.01% / $2m
TCO $465m $449m 3.40% / $16m
LTE Only WiFi Offload Delta % / $
Cumulative Free
$869 $888 2.2% / $19m
Cash Flow

© 2012 Wireless 20/20, LLC. – All rights reserved


…large vs. midsize city
21 deployment…

Conclusions & Recommendations


 In New York, a dense urban environment with high traffic profile,
MNO WiFi Offload is optimal at 100% coverage
 In San Diego, a urban environment, with high traffic profile, MNO
offload is optimal at 40% with diminishing return beyond 80%
 MNO WiFi offload makes an compelling business case under the right
circumstances
 Main driver is OpEx, especially the WiFi site rental and backhaul costs
as well as the assumed growth of the traffic demand on the 3G/4G
network.
 OpEx less than $40 per month a highly attractive solution
 OpEx exceed $100-$150 per month, it becomes challenging

Recommendation: Create a customized WiROI™ Tool for your market


to drive informed decisions. Contact us at www.wireless2020.com

© 2012 Wireless 20/20, LLC. – All rights reserved


…test drive our WiROI™ 4G WiFi
22 Offloading Tool online…

WiROI Tool Demo™

Test drive the WiROI™ Tool by register online at


www.wireless2020.com to gain access to our online
demo or contact us for a WebEx Demo.

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© 2012 Wireless 20/20, LLC. – All rights reserved